During his victory speech on election night, Donald Trump touched on most of the standard topics for such occasions. He thanked his supporters and his staff. He praised his wife and children. He pledged to keep faith with voters. But mostly, he talked about Elon Musk. Fully 17% of his remarks—as much time as he spent sketching out his plans for his presidency—were devoted to the “super-genius” who had taken a break from managing his various businesses to help Mr Trump’s campaign. He banged on about Mr Musk’s generosity, his efficiency and, most of all, the technological prowess of his firms: “That’s why I love you, Elon.”
Mr Musk, the world’s richest man, and Mr Trump, soon to be the world’s most powerful, are in the throes of a heady bromance. The pair have been inseparable since the election, with Mr Musk accompanying Mr Trump to Washington to meet Republicans in Congress and Mr Trump heading to Texas with Mr Musk to watch a test flight of a rocket built by SpaceX, one of Mr Musk’s firms.
Mr Musk, who styles himself “the first buddy”, appears to be involved in every element of the presidential transition. He is sitting in on interviews with prospective nominees to the cabinet. He has himself been named as the co-head of a new “Department of Government Efficiency” (DOGE), which is supposed to slash both red tape and wasteful spending. He has joined Mr Trump’s calls with world leaders, such as Volodymyr Zelensky, the president of Ukraine. He has also conducted freelance diplomacy on his own, meeting Iran’s ambassador to the un, according to the New York Times.
The hope that Mr Musk may bring a little business nous and technical wizardry to the Trump administration is alluring. Some blue-sky thinking could help diminish America’s yawning budget deficit, of about 6% of GDP, and overhaul its often clunky bureaucracy. But there are also many reasons to worry about Mr Musk’s ascendancy. There will certainly be troubling conflicts of interest: in part Mr Musk is interested in deregulation, after all, owing to the many pesky rules hemming in his companies. Critics also fear that America’s government may become dangerously reliant on a single individual, especially in the realm of space and satellites. Mr Musk’s forays into foreign policy could jeopardise both his own business interests and America’s diplomatic goals. Perhaps the most pressing question is whether the bromance can last, given that both men are known to have massive egos and frequent fallings-out with friends and colleagues. The stage is set, in short, for a tumultuous psychodrama with global ramifications.
Both Messrs Musk and Trump have already benefited hugely from their friendship. Mr Musk is thought to have spent about $200m to help get Mr Trump elected, an enormous amount given that the total declared spending so far of the campaign and outside groups is about $1.1bn (that will rise as final disclosures are filed). Mr Musk played a big part in efforts to turn out voters in swing states, focusing especially on those with little interest in politics. At the very least, that allowed the campaign to divert its limited funds to other purposes. It may also have helped galvanise support for Mr Trump among young men. Mr Trump, whose electoral pitch stresses his success as a businessman, clearly revelled in the endorsement of such a celebrated entrepreneur. That Mr Musk owns X, a social-media platform favoured by political types, and used it to cheerlead energetically for Mr Trump, was another bonus.
The benefits to Mr Musk of the bromance have been even bigger. Since the election, the market capitalisation of Tesla, the electric-vehicle (EV) firm that accounts for about two-thirds of his wealth, has grown by $300bn. That increment alone is more than double the combined market value of General Motors, Ford and Stellantis, the “big three” carmakers of Detroit. Although America’s stockmarket has risen across the board, Tesla’s ascent has been steeper (see chart). As Mr Musk owns roughly 20% of the firm, its surge has boosted his personal wealth by $60bn. The next biggest firm in Mr Musk’s portfolio, SpaceX, is privately held, so the jump in its value is harder to gauge. But reports suggest its shares also command a much higher price than before the election.
Investors clearly think that Mr Trump’s presidency will be good for Mr Musk’s firms. There are three broad explanations. First, the government is a big customer of SpaceX, in particular, with which it has signed over $15bn in contracts over the past decade. NASA accounts for most of this, but some transactions are for military purposes. SpaceX has a $14m contract with the us Space Force (the little sister of the air force) to provide communications to the Ukrainian armed forces and government until November 30th through its Starlink satellite network. Space Force is also paying SpaceX $733m to carry satellites into orbit. The Pentagon has plans to incorporate 100 satellites from SpaceX’s military division, Starshield, into its own communications network. Starshield also has a $1.8bn contract to help the secretive National Reconnaissance Office build spy satellites. The Space Development Agency has a $149m contract to send messages between SpaceX satellites by laser, and so on.
Presumably, more such custom could be forthcoming, especially from an administration well disposed towards Mr Musk. As it is, SpaceX conducted 90% of all orbital launches in America in 2023. Government agencies accounted for more than 20% of its business. By the same token, during Mr Trump’s first term, the Federal Communications Commission (FCC) offered Starlink subsidies to help expand access to broadband in rural areas. But a payout of almost $900m was rescinded during Joe Biden’s presidency. It could be reinstated in Mr Trump’s second term.
The stringency with which the government enforces regulations also has an impact on Mr Musk’s firms. They are the subject of 20-odd investigations and reviews by different federal agencies. The National Labour Relations Board, for example, is upset about how Mr Musk has handled workers’ campaigns to unionise at Tesla. The Department of Transportation has complained about the way Neuralink, Mr Musk’s brain-implant company, moves hazardous materials around. And the Fish and Wildlife Service thinks SpaceX has not done enough to protect the nests of birds near a launch site for its rockets in Texas. A less exacting administration could make all these problems go away.
In the grand scheme of Mr Musk’s business empire, however, his contracts with the government are small change and the regulators’ complaints are minor irritations. His companies are worth well over $1trn. His personal wealth is estimated at about $360bn. For all SpaceX’s government contracts, the majority of its revenue comes from Starlink, almost all of whose customers are commercial.
By far the most material way the Trump administration could affect his fortunes is by drafting new regulations and rescinding old ones. Mr Musk has long maintained that Tesla’s future hinges on the successful development of autonomous vehicles. At the moment, autonomous driving is regulated at the state level, putting Tesla at a disadvantage to Waymo, a subsidiary of Alphabet, the firm that owns Google. Waymo already operates “robotaxis” in a handful of cities, whereas Tesla has yet to launch any fully autonomous services. After Bloomberg reported on November 17th that Mr Trump’s transition team had told advisers it plans to make a federal self-driving framework a priority, Tesla’s shares soared, while those of Uber and Lyft, which could be hit by the competition, fell. Mr Trump is also reported to have invited Mr Musk to join a call with Sundar Pichai, the boss of Alphabet—an extraordinary opportunity for a commercial rival.
Another potential Trump policy, the scrapping of a generous tax credit for evs, would also have a big impact on Tesla. Although it would make the firm’s cars more expensive, it would hurt other American producers more, since Tesla’s costs are lower. “It would be devastating for our competitors,” gloats Mr Musk. In fact, the end of the credit along with higher tariffs (another Trump pledge) might be especially advantageous to Tesla, whose evs have the highest share of parts made in North America in the industry. Both domestic and foreign rivals would be hamstrung.
SpaceX’s fortunes, too, are heavily dependent on regulators. It has received the fcc’s approval to launch 12,000 satellites (it already has more than 6,000 in orbit), but has requested permission for 30,000 more. Mr Musk has also complained often and loudly about the lethargy of the Federal Aviation Administration (faa), which he accuses of “smothering” innovation with “Kafkaesque paperwork”. He quips that he can build a rocket faster than the agency can process the relevant approvals. SpaceX develops new spacecraft through frequent testing and redesign. Its commercial and government rivals tend to be more plodding and methodical. Byzantine bureaucracy thus burdens SpaceX more. A more permissive approach would be a boon.
The sensitivity of Mr Musk’s firms to regulation creates blatant conflicts of interest in his proposed role as co-head of doge. Yet neither Mr Trump nor Mr Musk seems to have any qualms. Mr Trump neatly captured the problem on the campaign trail when he grumbled, “I’m for electric cars. I have to be because Elon endorsed me.” Mr Musk, for his part, has stated that his dream and SpaceX’s explicit corporate goal of colonising Mars will be possible only with doge’s help: “The Department of Government Efficiency is the only path to extending life beyond Earth.”
The potential conflicts are so glaring that Mr Trump seems to be designing doge to skirt the relevant regulations. He specified, when announcing the department’s creation, that Mr Musk and Vivek Ramaswamy, a businessman-turned-politician who will be its joint boss, would provide ideas about reforming the bureaucracy “from outside of government”. As an adviser, rather than a federal employee, Mr Musk will not be subject to various ethics rules, notes Kathleen Clark of Washington University in St Louis.
But this arrangement may also diminish doge’s effectiveness, since it will resemble a commission more than a conventional government department. In fact, the prevailing wisdom in Washington is that doge will not amount to much. This is not because of any doubts about Mr Musk’s sincerity or abilities. He has campaigned against red tape for years, long before there was much prospect that he would be given an official mandate to trim it. He moved Tesla’s headquarters from California to Texas in part in protest at California’s bureaucratic ways. Last year he railed, in a typical tweet, “Like Gulliver, tied down by thousands of little strings, we lose our freedom one regulation at a time.”
At both Tesla and SpaceX, Mr Musk has proved himself a master of efficiency, reducing the cost of previously rarefied technologies to an extent incumbents had thought impossible. Mr Trump calls him “the greatest cutter”. (The president-elect seems to be especially impressed by Mr Musk’s decision after buying X to sack some three-quarters of its staff, although X’s value has shrunk dramatically under Mr Musk’s ownership, leaving it almost irrelevant to him financially.) Mr Musk himself has talked about cutting $2trn, or about a third, from the federal budget, and dramatically simplifying the tax code.
But the history of efforts to slash regulation and government spending in America is not encouraging. The sticking-point tends to be Congress, whose members are not keen to eliminate jobs in their own districts. Ronald Reagan set up a similar outfit, known as the Grace Commission, with an explicit mandate to “drain the swamp”. Congress shelved its proposals.
Messrs Musk and Ramaswamy have therefore said that they will recommend changes that Mr Trump can order unilaterally, without any new legislation. They claim the scope for this is huge because of two recent Supreme Court rulings that have curtailed the authority of the bureaucracy and thus called into question many existing rules. But legal challenges to any reforms are inevitable, and the pair will have only 18 months to make anything happen: doge cannot formally start work until Mr Trump becomes president on January 20th and is supposed to wind itself up by July 4th 2026.
Indeed, it is possible that Mr Musk’s influence has already reached its peak. He has lots of businesses to run and cannot put corporate life on hold indefinitely for endless backslapping at Mar-a-Lago, Mr Trump’s estate in Florida, or—in time—the White House. Presidential transitions are by their nature fluid and their direction malleable, especially before the most important personnel have been chosen. But in less than two months the transition will end and the more rigid, bureaucratic structures of Washington will replace it.
There is no exact historical precedent for Mr Musk’s influence over Mr Trump, but presidents and their business backers tend to fall out. William Hearst, a newspaper magnate, quickly became disillusioned with Franklin Roosevelt, whose first campaign for president he had enthusiastically backed. Andrew Carnegie, a steel baron who was the world’s richest man in his day, could not get Theodore Roosevelt to listen to him about foreign policy. Theodore Roosevelt also ended up crossing swords with J.P. Morgan, the founder of the bank of the same name, after having enlisted his help to end a mining strike.
There are already signs that Mr Trump is not entirely in thrall to Mr Musk. Although Mr Musk had called publicly for Howard Lutnick, a Wall Street financier, to be named Treasury secretary, Mr Trump gave him the less prestigious job of commerce secretary instead. Mr Musk is rumoured to be bickering with Trump advisers of long standing. Mr Trump displayed a hint of fickleness at a recent gathering at Mar-a-Lago, when he joked about Mr Musk, “I can’t get him out of here.”
At the very least, fears of Mr Musk’s overweening influence are probably overblown. SpaceX’s domination of a strategic industry is not unprecedented. ibm had an 88% share of the market in tabulating equipment in 1932 and a 70% share of the nascent computer industry in 1967. Its devices were crucial to the Pentagon and intelligence agencies, used for everything from air defence to cryptanalysis. at&t had a monopoly on telephone services for most of the 20th century and thereby made itself indispensable to American spooks. Both firms were eventually hobbled by antitrust suits—although the success of SpaceX and Tesla stems from superior products, not a monopoly.
In practice, Mr Musk’s influence over military affairs is not as untrammelled as it seems. For one thing, SpaceX’s position in space launch is commanding but not a monopoly, argues Doug Loverro, a former senior official at the Pentagon and nasa. The vast majority of its launches are of its own satellites, he notes. Strip those out and the picture looks more balanced. The us Space Force’s launch contracts for 2022 to 2027 are split roughly evenly between SpaceX and a rival consortium, he says. The Pentagon’s plans for mega-constellations for communications involve a dozen different contractors. Jeff Bezos, Amazon’s founder, is setting up a rival firm, Blue Origin. Starship, meanwhile, is well suited to sending large numbers of small satellites into low-Earth orbit and getting humans to Mars, he argues—not sending larger military and spy satellites to higher orbits. “The fact of the matter is it’s a very competitive field out there,” concludes Mr Loverro, “especially on the dod side.”
Nor is it clear that Mr Musk could actually use his leverage. “As much as the us government needs SpaceX,” says John Plumb, who until recently was assistant secretary of defence with responsibility for space, “SpaceX needs the us government.” The company requires operating licences from the fcc and launch licences from the faa. Although Mr Musk is an increasingly dominant supplier, the government is also a buyer with unusual purchasing power. “In my experience SpaceX has been an excellent partner for the Department of Defence. But if SpaceX for some reason decided to take on the full force of the US government,” concludes Mr Plumb, “that would be a terrible, terrible business decision and frankly crippling for them.” If need be, a president could even invoke the Defence Production Act of 1950, which allows the government to compel private firms to act in service of national security.
Even the idea that Mr Musk might wield undue influence over foreign policy can be flipped on its head. Mr Musk’s closeness to Mr Trump could be seen as a liability for his companies outside America. The most obvious test is China, where just over half of all Teslas are made. The firm’s dependence on China is, if anything, growing: in May, it broke ground on a second factory in Shanghai, to make batteries.
The leverage this gives the Chinese authorities over Tesla already appears to constrain Mr Musk’s actions. Although, in the name of free speech, he provides Starlink access to Iranians with smuggled terminals despite the objections of their government, he has not done anything similar in China. He tends to toe the official Chinese line on Taiwan and is fulsome in his praise for China as a place to do business.
The risk that Tesla could get caught up in Mr Trump’s dealings with China is obvious. “I think that the Chinese are thinking very carefully about how to use Musk to make clear to Trump that there are costs for tariffs,” says Zack Cooper of the American Enterprise Institute, a think-tank. He notes that China has few contacts within the Republican Party and may be hoping that Mr Musk can help manage relations with the Trump administration. “If Musk wants to continue making significant amounts of money in China, then they’re going to expect him to play a positive role,” says Mr Cooper, noting that China needs only to tweak rules on evs to have a big impact on Tesla’s fortunes.
Similar risks apply to Mr Musk’s involvement in politics in general. He is now so strongly associated with Mr Trump that he may put some people off buying Teslas, says Tu Le, of Sino Auto Insights, a consultancy. Although X saw record traffic during the election, since then the number of people leaving the platform for less maga-ish rivals such as Threads and Bluesky has surged. Moreover, the alliance between tech libertarians like Mr Musk and nativist populists that are the bedrock of Mr Trump’s support is fragile. One camp yearns for change, the other resents it. That is an irresolvable contradiction.
If things go wrong, Mr Musk may suffer dire consequences. His control of Tesla is not ironclad. Unlike other tech tycoons such as Mark Zuckerberg, who owns super-voting shares in Meta, Facebook’s parent, Mr Musk’s 21% stake in Tesla does not fully insulate him from other shareholders. If his politics end up harming the company, he could still be booted out. His bigger stake in SpaceX offers more protection—but a good relationship with Uncle Sam is essential to its operations. Mr Musk is entering an even more complex realm than rocket science. It will take a super-genius to navigate it without mishap.
© 2024, The Economist Newspaper Ltd. All rights reserved. From The Economist, published under licence. The original content can be found on www.economist.com
